Solicitors will be vulnerable to negligence claims if they are allowed to refer clients to financial advisers who are not wholly independent, the Law Society has warned.
In its response to the Solicitors Regulation Authority’s consultation on financial advice, the society pointed to the danger of actions alleging poor advice arising from such a referral. The SRA’s preferred option, to allow solicitors to refer their clients to advisers who may be tied into a financial product, presents a ‘clear risk’ to the profession, the response added.
Instead, the Law Society favours preserving the current rule that clients must only be referred to a recognised, wholly independent financial adviser.
‘[Removing the rule] requires clients and solicitors to make informed choices about referrals when neither party is necessarily best placed to make such decisions,’ the Society said. ‘In reality, in most cases, the obligation will be firmly on the solicitor to advise as to the best course of action from the information available whether or not they are sufficiently equipped to do so.
‘This presents a risk to both parties that are unnecessary given the other options available.’
The SRA has argued that a less prescriptive approach will be more consistent with outcomes-focused regulation. Its stance is that solicitors should have the freedom to assess the needs of each client and discuss their options.
However, the Society said this is an area that requires regulation to protect clients. It also questioned the need for change, given the lack of evidence of any inadequate or negligent advice from independent advisers.
The consultation closed earlier this month and a decision is expected later in the autumn.